Correlation Between Canadian Natural and ETFS Coffee

Can any of the company-specific risk be diversified away by investing in both Canadian Natural and ETFS Coffee at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Canadian Natural and ETFS Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canadian Natural Resources and ETFS Coffee ETC, you can compare the effects of market volatilities on Canadian Natural and ETFS Coffee and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Canadian Natural with a short position of ETFS Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and ETFS Coffee.

Diversification Opportunities for Canadian Natural and ETFS Coffee

-0.53

Correlation Coefficient

Canadian Natural  ETFS Coffee

Excellent diversification

The 3 months correlation between Canadian and ETFS is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC and Canadian Natural is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Canadian Natural Resources are associated (or correlated) with ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of Canadian Natural i.e., Canadian Natural and ETFS Coffee go up and down completely randomly.

Pair Corralation between Canadian Natural and ETFS Coffee

Assuming the 90 days horizon Canadian Natural is expected to generate 40.18 times less return on investment than ETFS Coffee. But when comparing it to its historical volatility, Canadian Natural Resources is 29.51 times less risky than ETFS Coffee. It trades about 0.04 of its potential returns per unit of risk. ETFS Coffee ETC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  92.00  in ETFS Coffee ETC on October 4, 2024 and sell it today you would earn a total of  5,089  from holding ETFS Coffee ETC or generate 5531.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.4%
Values	Daily Returns

Canadian Natural Resources  vs.  ETFS Coffee ETC

Canadian Natural Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ETFS Coffee ETC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Natural and ETFS Coffee

The main advantage of trading using opposite Canadian Natural and ETFS Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, ETFS Coffee can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ETFS Coffee will offset losses from the drop in ETFS Coffee's long position.

The idea behind Canadian Natural Resources and ETFS Coffee ETC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.